Centralization Exposed: 7 Oligopolies Around the Globe

Our world might seem to have an endless choice between products and services eager to get in your cart. Thousands of different brands, personalized for any need, a myriad of businesses, websites, value propositions, and product lines.

A while ago I was doing some research about the hotel industry and related blockchain applications. I had a shocking realization: plenty of online travel agencies are built only on 2 competing solutions. This made me think- surely the travel industry is not the only oligopoly in the global market. Where are the most centralized markets around us? Where are huge companies hiding behind a bunch of brands?

My research shows that centralization is real, and it is spreading through diverse industries from food to entertainment. In this article, we are going to see what centralization is, and the examples in the global market.

Centralization Facts

Centralization means, that a large proportion of a certain market share is held by only a handful of companies. This way these few businesses largely define market rules, distribution, pricing and have a huge role in the development of the industry. Another synonym for this is an oligopoly.

What is oligopoly?

Oligopoly consists of a select few companies having significant influence over an industry. Source- Investopedia

Centralization is often not obvious- several, seemingly distant brands can be owned and managed by the same mother company. The powerful players behind score with more efficient supplier management, collective production, with often only minor edits between the actual finished product except for the brand. The businesses often are in steep competition with each other, while posing as a powerful unit against new entrants. Centralized companies are able to use a massive scale of funding and influence, and keep smaller competition in check.

With just a few companies, they are largely able to define how the market works, and how will they behave towards us as consumers. This includes the products they provide, level of service, policies, price levels, distribution, leaving us at the mercy of what these few parties find comfortable.

It is often even rumored, that companies produce the exact same products, and market them under a different brand and price tag. Surely, you would not want to pay more for something which is just the same as the cheap brand.

  1. Food Industry

A picture says more than a thousand words. Hundreds of our favorite brands can be traced back to just a few major companies.

Source: Visual Capitalist

2. Film Industry

The film industry in 2018 amounted up to $12 billion USD.

77% of the film industry is in the hands of 5 companies: Buena Vista, Warner Bros., Universal, Sony/Columbia and 20th Century Fox. These 5 entities majorly define what we will see on the screen and how.

The rest of the market share is divided between medium players as Paramount, Lionsgate, STX Entertainment, MGM and Focus Features who own 9.6% of the market.

The other 6.8% of the market collects about 100 smaller studios.

Source: Box Office Mojo

3. Car Industry

Huge selection, plenty of models- yet only 14 companies produce these 60 car brands.

Source: Business Insider 2017

4. Computer market

Personal computers- notebooks, workstations and desktop computers- are also a market leaning heavily into an oligopoly. The market is measured here by shipment of units, totaling up at 67 million units only in Q3 2018. 78% of this market is represented by the 5 strongest players.

Source: IDC

5. Seed Industry

4 seed companies are controlling 60% of the global market. While this might seem unrelated to you- seeds control all the fresh produce we eat, food and many natural materials as cotton.

Source: Phil Howard, Michigan State University, https://philhoward.net

6. OTA Duopoly

Online Travel Agencies or OTAs are the multiple different platforms helping customers to book hotel rooms in a certain destination. They are also the ones who charge about 15-20% commission fees on the top of the price of hotel rooms. While it might seem that there is plenty of providers, in reality, there are 2 major parties governing 95% of the market: Priceline and Expedia. See some of their brands below. Don't be fooled- even if a website is not listed, they still might get their inventory from one of these 2 providers.

Source: Seeking Alpha & Online Bookings on Hotels

7. Technology

This last one might not be a surprise: major tech companies are ruling what happens in the industry.

Looking at the $180 billion USD cloud industry, we can see 5 major companies who provide the majority of services. Amazon Web Services is the market leader at the moment with their largely popular and enterprise-targeted AWS cloud servers and services.

Source: AWS Insider

We can also see the major competition for novel technologies such as artificial intelligence. Huge companies who are investing heavily in AI talent are the ones who are most likely to develop more sophisticated solutions and set themselves up for future success within the growing AI market.

Conclusion- Centralization is real

As you can see in the above examples, oligopolies are all around us, guiding billion dollar industries without us even knowing.

Centralization, while seemingly efficient for the companies itself, it becomes harmful for the consumer and the market itself. Innovation, selection, decisions remain at their mercy.

There is one powerful tool for disrupting: distributed ledger technologies. Blockchain can bring an amount of transparency and efficiency in transactions as never before. It can help to see the reality behind the multitude of brands, complicated supply chains and let us see a bit more of the convoluted market dynamics. I truly believe blockchain can bring a higher level of efficiency, and a better distribution of power in many markets.

Barbora JuhaszovaComment